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Making Employee Benefits Changes

    WHAT TO CONSIDER WHEN MAKING EMPLOYEE BENEFITS CHANGES 

    * Develop a communication strategy to ensure employees are aware of what changes are being made. 

    * Inform employees why the changes are being made. 

    * Give employees time to plan and decide on their benefits choices. 

    Why Benefits Are Important 

    As HR professionals are well aware, employee benefits play an important role in retaining employees. Although many employees (89%) are at least somewhat satisfied with their jobs, 40% considered the possibility of seeking employment elsewhere in the next 12 months.6 The leading reason for employees looking for external positions was higher compensation/pay (56%), followed by better overall benefits (29%). Other reasons for leaving that could be related to benefits were career advancement opportunities (21%) and flexibility to balance work and life issues (18%). In terms of motivation to stay with an organization, compensation/pay (44%) topped the list, followed by flexibility to balance work and life issues (34%) and the overall benefits package (32%). Thus, an attractive benefits package that includes professional development support and flexible work options that rival those of an organization’s competitors could help with employee retention and recruitment. In 2017, 16% of organizations increased professional and career development benefits, whereas 14% increased flexible working benefits. 

     

    COST OF BENEFITS 

    According to the U.S. Bureau of Labor Statistics, in 2016 employee benefits cost private industry and state and local government 32% of total compensation (wages and salaries plus benefits) (Figure 2). Because benefits are such an important factor for employees, as well as a substantial cost for employers, it is imperative that organizations leverage their benefits to the fullest extent possible. 

    What Organizations Can Do to Leverage Benefits 

    1. Conduct employee surveys and analyze organizational data to learn what benefits are most valued, if there are differences among employees and what employees want that your organization is not providing. Be mindful that conducting a survey will set up employee expectations that benefits may change or be improved. Therefore, an organization should have a clear purpose and a plan of action based on the survey results. Communicate the intent of the survey to employees and let them know what to expect and when. 
    2. Benchmark your organization’s benefits against others in your industry. Look for gaps where your organization either lags or leads your competitors. Combining this information with knowledge about what benefits your employees value will help inform decisions about benefits offerings and which benefits to highlight for prospective employees. Consider including information about your benefits package on your career website and in job postings. 
    3. Align benefits with organizational strategy, values and culture to help foster employee commitment, sense of purpose and engagement. For example, if your organization values contributing to the local community, organize volunteer opportunities for employees. SHRM research has found that when an employee recognition program is tied to organizational values, HR professionals perceive that the program delivers a stronger return on investment and has a greater impact on instilling and reinforcing corporate values, maintaining a strong employer brand, and meeting learning and development goals. 
    4. Implement strategies to help manage the cost of benefits. For example, the top two strategies organizations used to control health care costs were offering consumer-directed health plans (e.g., health reimbursement arrangements, or HRAs, and health savings accounts, or HSAs) and creating an organizational culture that promotes health and wellness. Do a cost-benefit analysis of all your benefits. 
    5. Review your benefits communication strategy to make sure benefits are understood and used by employees. For benefits with low uptake or use, consider revising the communication strategy and providing more frequent communication about the benefits. Giving employees periodic reminders or additional information about certain benefits could increase their use. In addition to focusing on employee satisfaction with the level of benefits, it is important to consider satisfaction with the benefits system, including communication, involvement in benefits planning and selection of benefits during open enrollment. 

     

    HEALTH CARE BENEFITS 

    The vast majority of organizations offered health care coverage to full-time employees in 2017—the same level as the past four years—and nearly all of them paid at least a portion of the health care coverage costs, with 16% covering the full cost (Figures 3 and 5). There has been an increase in the number of organizations offering coverage for part-time employees, with one-third of organizations (34%) offering coverage in 2017, up from 27% in 2014. Although most organizations shared the cost of premiums for part-time employees, fewer paid the full cost of premiums for these employees than for full-time employees, and 8% required costs to be fully paid by part-time employees. 

    Providing health care benefits to employees’ spouses and domestic partners is a strategy many organizations are using to help recruit and retain talent. Doing so helps employees save on overall health care costs for the family by having spouses or domestic partners covered under the same health plan. It also provides the convenience of having access to the same doctors in the 

    plan. If families have the same primary care physician or family doctor, health-related behaviors and treatments can be addressed for the entire family rather than on an individual basis. From 2014 to 2016, there was a large increase in coverage of both opposite- and same-sex spouses. Although more organizations offer coverage for opposite-sex spouses than for same-sex spouses, this gap has narrowed since the legalization of same sex marriage in 2015 (Figure 4). A large increase was also seen for opposite- and same-sex domestic partner coverage during the same period, resulting in more than one-half of organizations offering health care coverage for domestic partners. Compared with 2016, health care benefits for employees’ spouses and domestic partners seem to have leveled off. However, if organizations are experiencing increased recruiting difficulty and are not offering these benefits, it may be helpful to do a competitive analysis to see if other organizations are offering health care benefits for spouses and domestic partners. 

    Although many organizations have been extending health care coverage to employees’ families, two-thirds of organizations (66%) were very concerned about controlling health care costs and another 31% were somewhat concerned.9 From 2016 to 2017, health care costs increased for 79% of organizations, with an 11% increase on average.10 One strategy that some organizations are using to mitigate the costs of health care is to implement restrictions on coverage for spouses and domestic partners. Most commonly, organizations added a surcharge or denied coverage if the employee’s spouse was offered coverage by another employer. Other cost-saving measures included providing only secondary coverage, charging higher premiums or cost-sharing amounts, and not allowing employees to use pretax earnings to pay for spousal premiums. Organizations were less likely to place restrictions or surcharges on coverage for dependent children. A smoking surcharge added to the cost of health care premiums for employees was used by 19% of organizations, unchanged from 2016. 

    Although PPOs remain the most common type of health care plan and have stayed steady over the past five years, more organizations are adding a health saving account (HSA) component to their health care coverage. In 2016, adding an HSA was the most common strategy organizations used for controlling health care costs.11 HSAs were created by the Medicare bill in 2003 and are designed to help individuals save on a tax-free basis for future qualified medical and retiree health care costs. Contributions to the HSAs can be made by the employer, the employee or both. More than one-half (55%) of organizations offered this benefit in 2017, and more than one-third (36%) provided an employer contribution to the HSA, also showing an upward trend (Figure 6). At the same time, there has been a slight decrease in prevalence of medical flexible spending accounts (FSAs) over the past five years, whereas health reimbursement arrangements (HRAs) have remained steady around 20%. HRAs are set up by the employer for the employee, and the employer makes contributions for the employee to use for health care services. 

    Technology is affecting almost every aspect of people’s lives, both at home and in the workplace. For the health care industry, technology is changing treatments, information management and the delivery of health care services. For example, there has been an 11-percentage point increase over the past year in the prevalence of telemedicine as an employee benefit—offering diagnosis, treatment or prescriptions provided by phone or video (34%). On 

    the other hand, there has been a decrease in the percentage of organizations offering a 24-hour nurse line, which helps employees make more informed health care decisions, from 55% in 2013 to 43% this year. 

    The increasing cost of prescription drugs is yet another challenge affecting society, especially as new medication is developed for which there is not a lower-cost generic option. The vast majority of organizations (95%) provided a prescription drug coverage program that is bundled with medical insurance. The average employee co-pay for generic medication was $11, whereas brand medication co-pays were $33 for formulary and $58 for nonformulary (Table 1). Employee co-insurance ranged from an average of 27% for generic to 31% for nonformulary brand medication. Most organizations (85%) offered a mail-order prescription program, which can help reduce medication costs for employees. Another benefit option to help lower medication costs is to offer a wholesale generic drug program for injectable drugs, which has increased 11 percentage points since 2013 to 31%. 

     

    WELLNESS BENEFITS 

    Compared with all other benefits, organizations were most likely to make improvements to wellness benefits. Nearly one-quarter of organizations (24%) had increased wellness benefits offerings in the past 12 months (Figure 1). The most common wellness benefit was providing wellness resources and information (71%), and 62% gave wellness tips or information at least quarterly in the form of a newsletter, e-mail, column, tweets, etc. About three out of five organizations (59%) offered a general wellness program. For other wellness benefits prevalence and trends, 

    > WHY OFFER WELLNESS BENEFITS? 

    • Improved employee health: 88% of organizations with a wellness program rated their initiatives as somewhat or very effective in improving employee health. 
    • Reduced health care costs: 77% of organizations indicated their wellness program was somewhat or very effective in reducing health care costs. 
    • Culture of health: 53% of organizations wanted to create a culture that promotes health and wellness. 

    Source: SHRM 2016 Strategic Benefits Survey—Wellness Initiatives 

    > STANDING DESKS 

    Of the 300+ benefits covered in this research, providing employees with a standing desk had the greatest increase over the past five years (Figure 7). This new benefit grew more than threefold from 13% in 2013 to 44% in 2017, adding 11 percentage points in the last year. Recent medical research has found that sitting for long periods of time—regardless of the amount of physical activity—is associated with numerous negative health outcomes such as obesity, cardiovascular disease and increased risk of death.12 So even if employees are eating healthy food and exercising regularly, prolonged sitting could still put them at risk for health problems. Other wellness benefits that may encourage 

    employees to get up from their desks and move more often are providing fitness tracking bands (8%), organizing fitness competitions/challenges (28%) and simply encouraging employees to take breaks. 

    PAID LEAVE BENEFITS 

    Paid leave is considered a very important aspect of overall job satisfaction by employees, and the vast majority of HR professionals agree that taking vacation is important for positive talent management outcomes like morale, wellness, performance, retention and productivity.13,14 Providing adequate sick leave encourages employees to stay home when they are sick, thereby reducing the spread of illness in the workplace and presenteeism. The value of paid leave benefits is reflected by the large majority of organizations (96%) that provided paid leave for the purpose of vacation, although fewer organizations (81%) offered paid time off for sickness (Figure 8). In addition to vacation and sick leave, one-third of organizations (33%) opted to provide paid personal leave. 

    Most organizations (91%) paid at least some portion of unused paid vacation leave upon voluntary termination, and two-thirds (68%) allowed employees to roll over at least some of their unused paid vacation leave.15 This gives employees more flexibility in deciding when and how to use their leave, while limiting the number of days that can be rolled over incentivizes employees to take time off. 

    Although most organizations tracked paid leave for vacation and sickness separately, about one-quarter (28%) used a paid time off (PTO) bank system, wherein no differentiation exists between types of paid leave. Under this plan, employees have more freedom and flexibility in managing their leave. However, a downside of a PTO bank system is that employees may be reluctant to take leave when they are sick so that they can save it for vacation or other reasons. Some organizations offered a leave cash-out option for vacation leave (14%) or a PTO bank (10%), whereas fewer organizations offered it for sick and personal leave (Figure 9). This option allows employees to cash out a portion of their balance either upon request on an annual basis or once they have accrued a certain amount of leave or met other criteria. Leave donation programs—wherein employees donate vacation leave to a general pool that can then be used by other workers—were slightly less common. The benefit of leave donation is that employees who exhaust their paid leave for certain reasons can receive compensation from the leave donation bank while they are unable to work. 

    Thirty percent of organizations provided paid maternity leave, which includes coverage by family or parental leave policies but excludes what is covered by short-term disability or state law. This offering has increased slightly from 26% in 2016.c Fewer organizations (24%) offered paid paternity leave. On average, organizations that offered paid leave for a new child provided 41 days for maternity leave, 22 days for paternity leave, 31 days for adoption leave and 36 days for surrogacy leave.16 The federal Family and Medical Leave Act (FMLA) guarantees eligible employees 12 weeks of unpaid job-protected leave during any 12-month period, which includes caring for a new child; however, without pay, employees may need to return to work prior to 12 weeks. 

    Among employees who have paid maternity or paternity leave, some of this leave is not being used. The data also show a disparity based on the gender of the employee (Figure 10). Two-thirds of female employees (66%) had taken all their available paid maternity leave in 2016, but far fewer male employees (36%) had used all of their available paternity leave. In fact, 40% of male employees used less than half of the paid parental/family leave they had available, compared with 13% of female employees, alluding to the gender divisions that persist in the caretaking of young children. So even in organizations that offer leave to care for a new child, some employees are not taking full advantage of this benefit. Organizations may want to determine why their workers are not using parental/family leave and encourage employees to take it. As with any type of workplace culture issue, it is important to get organizational leaders and managers on board to help define and reinforce the desired culture. 

     

    RETIREMENT SAVINGS AND PLANNING BENEFITS 

    Most organizations offer retirement plans to help employees save and plan for their financial future. Defined benefit contribution plans were the most common, with 90% offering a traditional 401(k) or similar plan and 55% offering a Roth 401(k) or similar plan. Three-quarters of organizations (76%) provided an employer match for their 401(k) plans while 40% matched Roth 401(k) contributions. One-quarter of organizations (24%) offered a traditional defined benefit pension plan that was open to all employees, and 11% of organizations had a pension plan that was frozen for current employees or not open to new hires. 

    Compared with five years ago, fewer organizations offered defined contribution plan hardship withdrawals, defined contribution savings plan loans and investment retirement advice offered online. However, investment retirement advice offered either one on one or in a group/classroom was unchanged. More organizations were permitting conversion of funds in a traditional 401(k) account into a Roth 401(k) account compared with 2013, and there has also been a RETIREMENT SAVINGS AND PLANNING BENEFITS increase in offering an informal phased retirement program. A phased retirement program provides a reduced schedule and/or responsibilities prior to retirement, which can help facilitate the transition and transfer of knowledge for both the retiring employee and his or her co-workers. 

    Among employees who are planning to retire, there is a common fear of running out of money in retirement. To help provide lifetime income retirement solutions, some organizations are offering an in-plan annuity option (9%) or providing assistance for retirees to purchase an out-of-plan annuity with in-plan assets (2%) for their traditional 401(k), Roth 401(k) or other defined contribution retirement savings plans. When providing these options, organizations should include educational opportunities about annuities along with their other retirement-preparation specific planning advice, which is offered by 44% of organizations. 

     

    WORK-LIFE AND CONVENIENCE BENEFITS 

    > 2/5 of organizations cited offering more flexible work arrangements as one of the most effective recruiting strategies. 

    Flexible working benefits are a cost-effective way to help employees balance their work and personal lives. Two out of five organizations cited offering more flexible work arrangements as one of the most effective recruiting strategies.17 Three out of five organizations (62%) allowed some type of telecommuting, and 57% offered flextime, allowing employees to choose their work hours within limits established by the employer. The biggest change for flexible working benefits was an increase in telecommuting on an ad-hoc basis (59%) over the past five years. Telecommuting on a part-time basis (35%) increased slightly over the past year, and less than one-quarter of organizations (23%) allowed telecommuting on a full-time basis. Not only has the workplace grown more flexible, the culture has become more casual, with more organizations allowing casual dress every day compared with 2013. There were less pronounced increases for mealtime flex (45%) and shift flexibility (25%). The only five-year decrease for flexible working benefits was a compressed workweek. Some organizations have gone further in terms of flexibility and work-life balance. A new benefit added to the survey in 2017, a four-day workweek of 32 hours or less per week, was implemented by 13% of organizations. To meet the criteria for this benefit, it had to apply to all employees for either all or part of the year. 

    Family-friendly benefits provide financial support and services for employees’ spouses, domestic partners, children and other family members. The most common benefit was a dependent care flexible spending account (67%), which allows employees to have a pretax payroll deduction for dependent care expenses. The one family-friendly benefit that changed over the past five years was an onsite lactation room/mother’s room (42%), which increased 8 percentage points compared with 2013. It needs to be a separate room that goes above and beyond the ACA law requirements that employees be “shielded from view” and “free from intrusion” during their break. In 2017, a new benefit option was added to the survey for shipping breast milk while on business travel, which was only offered by 1% of organizations. 

    Employee programs and services are designed to save employees time and energy on everyday tasks like purchasing or preparing food and beverages, create opportunities for employees to socialize and meet their co-workers through events like an annual company outing (64%) or community volunteer programs (42%), and provide services like legal assistance (26%) or postal services (26%). The only two changes in benefits for this category were an increase in offering free coffee (from 72% to 80% over the past five years) and a decrease in offering a fully or partially subsidized onsite cafeteria (16% compared with 23% in 2013). Although it was not covered in this research, some organizations may provide occasional lunches or snacks for employees. 

     

    FINANCIAL AND CAREER BENEFITS 

    In addition to wages and salary, many organizations offer other types of compensation benefits to employees. Service anniversary awards (54%) were the most common type of compensation benefit; however, they have decreased in popularity from 62% in 2013. Monetary benefits were 

    provided through various types of bonuses, like an executive incentive bonus plan (51%), employee referral bonus (48%) and spot bonus/ award (45%) for going above and beyond in some capacity. Sign-on bonuses for both executives (35%) and nonexecutives (25%) have increased over the past five years, possibly because of the improved economy and talent shortage. Another benefit that changed was shift premiums, offered by one-third of organizations (33%) in 2017, which dropped 8 percentage points from 2013 to 2014 and has stayed at a similar level since. 

    Organizations have many different options in providing employees with financial benefits, such as company-paid group life insurance (85%), free onsite parking (83%), technology and education assistance, financial services, and other discounts. As illustrated in Figure 13, more organizations are offering financial advice compared with 2016 as well as five years ago. Nearly one-half (49%) provided some type of financial advice, whether it was online, one on one or in a group or classroom format. This benefit can help employees improve their financial management skills, plan how to manage debt, and hopefully alleviate stress and worry as a result of this type of education. A few organizations (4%) even provide assistance in repaying student loan debt—a benefit that has stayed steady since it was added to the survey in 2014. However, there has been a decrease over the past five years in the number of organizations offering undergraduate (53%) and graduate (50%) educational assistance, as well as educational scholarships for members of employees’ families (11%). 

    A lack of career advancement opportunities was cited as a reason for leaving an organization by 21% of employees.18 Although providing opportunities for promotions or transfers may not always be possible, offering employees professional development opportunities may help with succession planning, as well as create a more educated and talented workforce for the organization. Professional development benefits may also help mitigate recruitment challenges. Nearly one-half of HR professionals (48%) indicated that the most effective recruiting strategy for their organization was training existing employees to take on hard-to-fill positions.19 The most common professional development benefits offered were professional memberships (89%) and either offsite or onsite professional development opportunities (87%). In the past year, offsite professional development opportunities have increased 6 percentage points to 72%, whereas onsite professional development opportunities (83%) have remained same. 

     

    TRAVEL AND RELOCATION BENEFITS 

    When employees need to go on business travel, reimbursements and perks can help make travel more convenient and comfortable. The most common benefits in this category were travel reimbursements for taking a taxi to the airport (87%) and for parking at the airport (87%). Three-quarters of employers (76%) provided per diem reimbursement for meals and snacks, up from 70% in 2013. Fewer organizations provided reimbursement for personal telephone calls while on business travel (36% versus 44%) compared with 2013, but that may be because most employees have personal or business cell phones. The other business travel benefit that decreased was paid 

    travel expenses for a spouse, only offered by 2% of organizations compared with 7% five years ago. 

    Housing and relocation benefits are the least commonly offered benefit category, with the top benefit—relocation lump sum payment—offered by 29% of organizations. Temporary relocation benefits decreased 4 percentage points over the last year, with 20% offering this benefit in 2017. Two benefits decreased over the past five years: location visit assistance (15% from 22%) and reimbursement of shipping fees (13% from 20%). 

     

    CONCLUSION 

    In today’s competitive talent marketplace, it is imperative for organizations to make informed and strategic decisions about what benefits to offer as part of their total rewards strategy. Using a variety of sources to stay up to date on benefits trends and innovative strategies and continually assessing the fit of offerings with your organization’s culture are crucial steps in securing the organization’s current and future talent needs. This report can provide insight into overall benefits prevalence and trends, and customized industry-level reports are available through SHRM’s Benchmarking Service. HR professionals and organizations can use the below questions to help evaluate their benefits offerings and make strategic benefits decisions. 

     

    > QUESTIONS TO GUIDE STRATEGIC BENEFITS DECISIONS 

    • What benefits do current and potential employees value? 
    • How does your organization compare to its competitors? 
    • Are your benefits aligned with organizational strategy, culture and values? 
    • Are your benefits cost-effective and sustainable? 
    • Do you communicate benefits to employees effectively?